US points to India, China for oil price hike too

By Arun Kumar Washington, May 6 (IANS) White House has pointed a finger at India and China for the spike in oil prices even as it sought to clarify President George Bush’s remark about Indian middle class contributing to rising food costs. A presidential spokesman Monday also stuck to its guns on bio-fuels asserting that US policy of promoting corn-based ethanol in motor fuel supplies was having only a “small impact” on world food prices.

“I would point out that obviously the demand for oil is growing around the world,” spokesman Scott Stanzel told reporters when asked to comment on oil price hitting a record $120 a barrel Monday.”Many developing nations like India or China are having greatly increased demand, which obviously is having an impact on price,” he said.

Asked to clarify Bush’s remark last week that growing prosperity of India’s large middle class is contributing to rising food prices around the world, Stanzel said: “I can certainly clarify that. We think it is a good thing that countries are developing, that more and more people have higher and higher standards of living.”

“The point I think that was to be made is that as you increase your standard of living, the food that you eat - it can venture more into meats that require more commodities to feed the livestock, which uses more of those commodities, whether it’s corn or wheat or other commodities, and it drives up the price,” he said.

“So that is just a function of how those food prices that we’ve seen spike in the… around the world.”

But reacting to the retort from Indian politicians that that US policy of promoting corn-based ethanol has had a bigger impact on world food prices, he said food prices rose about 43 percent over the last year. “Of that portion, an increase in the biofuel production, about 1.5 percent of that, is due to an increase in biofuel production.”

“The other majority, vast majority of that, is due to things like increased demand, like you were talking about, or increased energy prices, or weather-related problems in Australia or in Eastern Europe - problems with wheat production, as an example - that’s driving up the price of those commodities.

“So the fact that we are making more biofuels so we reduce our dependence on foreign energy has an impact, but we believe it is a small impact,” Stanzel said.

“… actually, it’s the view of the economic advisors that the impact of biofuel production on food price will diminish over time.”

Stanzel said a law signed by Bush in December regarding energy put a cap of 15 billion gallons of corn-based ethanol that the US can produce.

Bush’s remarks on Indian middle class had touched off a furore in India with political parties across the spectrum making critical comments and Defence Minister A.K. Antony describing them as a “cruel joke”.

Noting that the US is importing about 12 million barrels of oil per day, Stanzel said the record oil price was “another example that it’s important for the United States to become less dependent on foreign sources of energy.”

“We also have to do more in terms of weaning ourselves off of that foreign oil by expanding the use of alternative sources of fuel, not only corn-based ethanol, but other types of ethanol that we’re investing heavily in - cellulosic ethanol as well as hydrogen battery - or battery technology, hydrogen fuel cell technology.”